Monitored and regulated by the Ontario Energy Board, the rate-setting process considers a number of costs that help transmission companies arrive at a rate that is accurate and fair to charge consumers. This is known as the provincial transmission rate. It is expressed in $/megawatt (MW) month.

This section describes the following:
 

• Approved costs
• Other factors
• Income for transmission companies

Approved Costs

Once an approved base rate is set, certain factors are considered and added to the base rate to reach the approved costs. These costs include:

• depreciation* of 2.5 percent
• allowed return on equity of 5.3 percent (40 percent equity)
• allowed return on debt of 8.3 percent (60 percent debt)
• forecasted operation costs
• forecasted taxes.
   

* Depreciation is the reduction in the value of an asset over time. In accounting terms, it allows owners to spread the cost of an asset over the span of several years.
 

Other Factors

Other factors that affect the provincial transmission rate after the approved costs have been established are:

• approved costs of other transmission companies
• forecasted demand.

When transmission companies deliver electricity to consumers, the actual demand is compared to the forecasted demand. This is an important element in calculating the actual income, as well as the return on equity the transmission companies will receive.

Income for Transmission Companies

The transportation rate is also included in the actual income for transmission companies as a percentage of an individual transmitter's approved costs. It is included as a percentage of the sum of all transmitters' approved costs. This is referred to as the sharing factor.

Certain factors are deducted from the actual income for transmitters, such as:

• depreciation
• interest payments
• operating costs
• taxes.

The transmission system in Ontario sets uniform rates for all customers, meaning that the rate for network, line connection and transformation connection services are the same for everyone. Fair, consistent and transparent practices contribute to ensuring that Ontario’s transmission system meets the needs of stakeholders and consumers.